Typically, a higher credit score means that you are more likely to get accepted for credit, while a lower credit score lessens your chances of being approved.
A high credit score suggests that you are a reliable borrower who repays on time and a low credit score indicates to lenders that you may not be able to repay what you borrow.
But your credit score is only half of the story and lenders will consider other factors, such as your income and employment, when deciding whether to approve your credit.
What is a good credit score?
In the UK, each credit reference agency has its own credit rating system so there is no universal magic number that counts as a ‘good credit score’ and guarantees a successful credit application.
That is because lenders don’t report your data to every credit reference agency. Some lenders only report to one or two agencies, while others might share your information with all three.
It means that what is a good score varies between the different agencies.
For instance, with Equifax, a good credit score starts from 531 while for Experian it is 881 and with TransUnion, it is 604.
So don’t panic if your credit score looks a little different in each credit report. The main thing to look out for is the classification of your score.
The table below shows the classifications for what is a good credit score at each credit reference agency.
|Excellent||811 to 1,000||961 to 999||628 to 710|
|Very good||671 to 810||-||-|
|Good||531 to 670||881 to 960||604 to 627|
What credit score do you need for a loan, credit card or mortgage?
No set credit score will guarantee you a mortgage, loan or credit card. That is because each credit reference agency has its own credit rating system with different scores. And not all lenders use the same credit reference agency to check your credit history.
Lenders often consider other factors when deciding whether to approve your credit application.
In addition to this, each lender has different opinions on what they consider to be good or acceptable for their own products, and this may vary from the credit reference agency’s definitions listed earlier in the article.
Credit score for mortgages
The credit score you need for a mortgage varies depending on the mortgage lender.
When you apply for a mortgage, lenders will check your credit history to see how you have managed credit in the past. Although a higher credit score could help your chances of being accepted for a mortgage, your credit history is one of many things lenders will look at during your application process.
Mortgage providers also have to consider whether you can afford the mortgage repayments. To do this, they will look at your income, spending and whether you will be able to keep up with repayments over the next five years or more. They will also test to see whether you could manage to keep up with repayments if interest rates were to suddenly rise as part of the affordability evaluation.
Using all of this information, they will decide whether to approve your mortgage application.
Having a poor credit history does not ruin your chances of getting a mortgage. So, although your options may be limited, you can get a mortgage with bad credit. Most lenders ask for a larger deposit and charge higher rates of interest for bad credit mortgages.
Credit score for loans
Typically, lenders check your personal details when deciding whether to offer you a loan.
These include your credit history, to see if you are a reliable borrower and have a good track record of paying your debts on time.
A good credit score can improve your chances of being approved for a loan but it is not guaranteed.
Lenders will also look at your income and employment status to see if you have a steady income and can afford the repayments.
It is still possible to get a loan with bad credit. But these loans tend to be more expensive and there is a smaller pool of lenders to choose from.
It is always worth using a free online eligibility checker before applying for a new loan to see which ones you are more likely to be approved for.
Credit score for credit cards
As with a mortgage or personal loan, there is no set credit score that will guarantee you a credit card.
Lenders will ask for details, such as your employment status and income, to work out whether you are eligible for a credit card too.
There are still options available if you have a poor credit history but need a credit card. Some lenders offer credits cards for bad credit, though they tend to charge higher rates of interest and offer lower credit limits.
What is a bad credit score?
Just as there is no universal ‘good credit score’, there is also no universal ‘bad credit score’ because each credit reference agency has its own rating system.
The table below shows what is a bad credit score at the UK’s main credit reference agencies.
|Poor||0 to 438||561 to 720||551 to 565|
|Very poor||-||0 to 560||0 to 550|
People tend to have a bad credit score if they have no history of borrowing. That’s because lenders don’t have any evidence to suggest that you are good at repaying your debt.
You may also have a bad credit score if you have missed payments, have county court judgments (CCJs) or have declared bankruptcy. That’s because there is a higher risk to lenders that you might not repay the money you borrow.
Luckily, your credit score is not unchangeable and you can take steps to rebuild your credit history if you have bad credit.
How to improve your credit score
Improving your credit score could help boost the success of your applications for loans, mortgages and credit cards.
A few simple ways to improve your credit score include:
- Checking your credit score regularly:knowing your credit score and credit history can help you find areas to improve. It also helps spot mistakes or fraudulent activity that could damage your score.
- Repaying on time:keeping up with repayments shows lenders that you are a reliable borrower and can handle regular repayments.
- Using credit wisely:keeping your credit utilisation low shows that you use credit responsibly and don’t rely on it too heavily.
Improving your credit score is like running a marathon, and it will take time before you start to see the benefits of your actions. In some cases, it may take a few months or more before your credit score increases.
The main thing to focus on is getting your finances on the right track by using credit responsibly and keeping up with repayments. In time, you should start to see your credit rating improve.
How to check your credit score
In the UK, credit reference agencies have to offer a free statutory credit report by law. This is a basic snapshot of your financial history that includes:
- credit agreements
- missed or default payments
- electoral roll details
Your statutory credit report doesn’t include your credit score or monitoring services. Experian offers a free account, where you can check your credit score monthly, as well as a monthly subscription for additional services, while Equifax offers a 30-day free trial before you pay a subscription fee. With TransUnion, you can get your credit score for free through Credit Karma.
You can check your credit score for free using other platforms that pull data from the main credit reference agencies. Each platform offers a full credit report that includes your credit score and credit monitoring services that show how much your score changes each month and gives tips on how to improve your score.
These platforms also offer eligibility calculators that show how likely you are to be accepted for loans and credit cards.
The following platforms let you check your credit score for free:
- ClearScore (uses Equifax data)
- Credit Karma (uses TransUnion data)